What is net realizable value? How is net realizable value affected when a receivable is written off under the allowance method?

Solution: Net Realisable value is the estimated selling price in the ordinary course of business less the estimated cost of completion and the estimeted costs necessary to make the sale.

Difference between net realisable value and fair value:

Net realisable value refers to the net amount that an entity expects to reaslise form the sale of its assets. Fair value reflects the price at which an orderly transction to sell the same asset in the principal market for thet inventory would take place bet ween market participants at the measurement date. the former is an entiry specific, the latter is not. Net realisable value or an asset may not be equal to fair value less cost of asset.

How is net realisable value affected when receivable is written off under allowance method?

Under the allowance method, a write?off does not change the net realizable value of accounts receivable. It simply reduces accounts receivable and allowance for bad debts by equivalent amounts. Customers whose accounts have already been written off as uncollectible will sometimes pay their debts.